GE Power Conversion India Private Limited, CHENNAI V. ITO Corporate Ward 2(4) Company Range 2, CHENNAI

ITA 3087/CHNY/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1058 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 14-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SREENIVASA RAO
• Keywords: Transfer pricing

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.3087/CHNY/2017 ( )( / ASSESSMENT YEAR : 2013-14 M/S GE POWER CONVERSION INDIA PRIVATE LIMITED, (SUCCESSOR TO GE POWER CONVERSION TECHNOLOGY PVT. LTD. AND FORMERLY KNOWN AS CONVERTEAM EDC PVT. LTD.) KAMAK TOWERS, PLOT NO.12-A(SP), THIRU VI KA INDUSTRIAL ESTATE, EKKATUTHANGAL, GUINDY, CHENNAI - 600 032. PAN : AAFCA 2499 F V. THE INCOME TAX OFFICER, CORPORATE WARD 2(4), COMPANY RANGE 2, CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI SRIRAM SESHADRI, CA -.+, / 0 / RESPONDENT BY : SHRI M. SREENIVASA RAO, CIT 1 / 2% / DATE OF HEARING : 06.08.2018 3') / 2% / DATE OF PRONOUNCEMENT : 12.09.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE ASSESSING OFFICER DATED 29.09.2017, CONSEQUENT TO T HE DIRECTION OF THE DISPUTE RESOLUTION PANEL DATED 23.08.2017. 2 I.T.A. NO.3087/CHNY/17 2. SHRI SRIRAM SESHADRI, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERAT ION BEFORE THIS TRIBUNAL IS WITH REGARD TO COMPARABLE COMPANIES SELECTED BY THE ASSESSEE. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE C LAIMED ITSELF AS A SOFTWARE COMPANY. HOWEVER, THE ASSESSING OFFICER D ETERMINED THE ASSESSEE AS AN ENGINEERING DESIGN SERVICE PROVIDER. THE ASSESSEE, IN FACT, ACCEPTED THE DETERMINATION OF TPO AS ENGINEER ING DESIGN SERVICE PROVIDER. THE TPO HAS REJECTED ALL THE COMPARABLE COMPANIES SELECTED BY THE ASSESSEE. ACCORDING TO THE LD. REPRESENTATI VE, THE TRANSFER PRICING OFFICER SELECTED FOUR COMPANIES BY HERSELF. ONE OF THE COMPANIES IS M/S ACROPETAL TECHNOLOGIES LTD. THE O PERATING PROFIT OF M/S ACROPETAL TECHNOLOGIES LTD. IS 61.11%. ACCORDI NG TO THE LD. REPRESENTATIVE, THIS TRIBUNAL IN THE CASE OF M/S BL OOM ENERGY INDIA PVT. LTD. IN I.T.A. NO.2857/CHNY/2017 DATED 20.06.2018, CONSIDERED THE CASE OF M/S ACROPETAL TECHNOLOGIES LTD. AND FOUND THAT T HE OPERATING PROFIT OF M/S ACROPETAL TECHNOLOGIES LTD. WAS SIGNIFICANTLY H IGH AND NOT CONSISTENT WITH OTHER COMPARABLE COMPANIES. THEREFORE, ACCOR DING TO THE LD. REPRESENTATIVE, THE TRIBUNAL FOUND THAT THE STATEME NT OF ACCOUNTS OF M/S ACROPETAL TECHNOLOGIES LTD. CANNOT BE RELIED UPON. THE LD. REPRESENTATIVE FURTHER SUBMITTED THAT SECURITY EXCH ANGE BOARD OF INDIA ALSO FOUND THAT THERE WERE SOME MALPRACTICES BY M/S ACROPETAL TECHNOLOGIES LTD. AND ENQUIRY WAS GOING ON. IN THO SE CIRCUMSTANCES, 3 I.T.A. NO.3087/CHNY/17 ACCORDING TO THE LD. REPRESENTATIVE, M/S ACROPETAL TECHNOLOGIES LTD. CANNOT BE CONSIDERED TO BE A COMPARABLE COMPANY. I F M/S ACROPETAL TECHNOLOGIES LTD. WAS REMOVED FROM COMPARABLE COMPA NIES, ACCORDING TO THE LD. REPRESENTATIVE, THEN THERE MAY NOT BE AN Y NECESSITY FOR TRANSFER PRICING ADJUSTMENT. 3. ON THE CONTRARY, SHRI SRINIVASA RAO, THE LD. DEP ARTMENTAL REPRESENTATIVE, SUBMITTED THAT M/S ACROPETAL TECHNO LOGIES LTD. IS ALSO IN THE BUSINESS OF ENGINEERING DESIGN SERVICES. THERE FORE, ACCORDING TO THE LD. D.R., THE TRANSFER PRICING OFFICER HAS RIGHTLY SELECTED THE SAID COMPANY AS COMPARABLE COMPANY. REFERRING TO THE GR OUNDS OF APPEAL, THE LD. D.R. SUBMITTED THAT THAT ASSESSEE HAS RAISE D SO MANY GROUNDS. ONE AMONG THEM IS VIOLATION OF PRINCIPLES OF NATURA L JUSTICE. THE ASSESSEE HAS ALSO RAISED CONSIDERATION OF FOREIGN E XCHANGE FLUCTUATION AS A NON-OPERATING ITEM WHILE COMPUTING OPERATING M ARGINS. THE DRP AFTER CONSIDERING ALL THE GROUNDS RAISED BY THE ASS ESSEE, ACCORDING TO THE LD. D.R., CONFIRMED THE ORDER OF THE TRANSFER PRICI NG OFFICER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. EVEN THOUGH THE ASSESSEE HAS RAISED SO MANY GROUNDS IN THE GROUNDS OF APPEAL, THE CHARACTERIZATION OF THE ASSESSEES BUSINESS AS ENGI NEERING DESIGN SERVICE PROVIDER IS NOT CHALLENGED BY THE ASSESSEE. THE ASSESSEE IS NOW 4 I.T.A. NO.3087/CHNY/17 CONTESTING ONLY THE COMPARABLE CASE BEFORE THIS TRI BUNAL. THE LD. REPRESENTATIVE FOR THE ASSESSEE CLARIFIED THAT IF T HE COMPARABLE COMPANY SELECTED BY THE TPO, NAMELY, M/S ACROPETAL TECHNOLO GIES LTD. WAS REMOVED FROM COMPARISON, THERE IS NO NEED FOR ANY T RANSFER PRICING ADJUSTMENT. IT IS A FACT THAT THE ASSESSEE CLAIMED BEFORE THE ASSESSING OFFICER THAT IT IS A SOFTWARE DEVELOPMENT SERVICE P ROVIDER. IN FACT, THIS CLAIM OF THE ASSESSEE WAS REJECTED BY THE DISPUTE R ESOLUTION PANEL AND CONFIRMED THE CLASSIFICATION AS ENGINEERING DESIGN SERVICE PROVIDER. 5. SINCE THE ASSESSEE IS NOT CONTESTING THE CHARACT ERIZATION OF THE BUSINESS, THIS TRIBUNAL IS OF THE CONSIDERED OPINIO N THAT THE ASSESSEE- COMPANY HAS TO BE CONSIDERED AS IN THE BUSINESS OF ENGINEERING DESIGN SERVICE. THE ASSESSEE HAD NO OCCASION TO PROVIDE T P DOCUMENTATION IN RESPECT OF ENGINEERING DESIGN SERVICE. SINCE THE A SSESSEE CLAIMS THAT IT IS A SOFTWARE DEVELOPMENT SERVICE PROVIDER, IT SELE CTED THE COMPARABLE COMPANIES WHICH PROVIDE SOFTWARE DEVELOPMENT SERVIC ES. THEREFORE, THE TPO REJECTED THE COMPARABLE COMPANIES SELECTED BY T HE ASSESSEE AND SELECTED THE COMPANIES WHICH PROVIDE ENGINEERING DE SIGN SERVICE. 6. AS RIGHTLY SUBMITTED BY THE LD. REPRESENTATIVE F OR THE ASSESSEE, THIS TRIBUNAL IN THE CASE OF BLOOM ENERGY INDIA PVT . LTD. (SUPRA) FOUND THAT M/S ACROPETAL TECHNOLOGIES LTD. DISCLOSES SIGN IFICANTLY HIGH PROFIT AND IT IS ALSO NOT DECLARING PROFIT REGULARLY. THE REFORE, THIS TRIBUNAL FOUND 5 I.T.A. NO.3087/CHNY/17 THAT IT HAS TO BE EXCLUDED. IN THOSE FACTUAL CIRCU MSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED BY THE TPO. IN OTHER WORDS, THE ASSESSEE SHALL FILE TRANS FER PRICING DOCUMENTATION WITH REGARD TO ENGINEERING DESIGN SER VICE. THE ASSESSING OFFICER SHALL REFER THE MATTER TO THE TPO FOR RECON SIDERATION. ACCORDINGLY, THE ORDERS OF ALL THE AUTHORITIES BELOW ARE SET ASI DE AND THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL REFER THE MATTER TO THE TPO ONCE AGAIN. THE TPO SHALL RE-EXAMINE THE MATTER AFTER CONSIDERING THE TP DOCUMENTATION T HAT MAY BE FILED BY THE ASSESSEE WITH REGARD TO ENGINEERING DESIGN SERV ICE AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFT ER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. IT IS OPEN TO THE ASS ESSEE TO FILE OBJECTION TO THE DRAFT ASSESSMENT ORDER THAT MAY BE PASSED BY TH E ASSESSING OFFICER AND FOLLOW THE PROCEDURE LAID DOWN UNDER THE I.T. A CT. 7. WITH THE ABOVE OBSERVATION, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 12 TH SEPTEMBER, 2018 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 12 TH SEPTEMBER, 2018. KRI. 6 I.T.A. NO.3087/CHNY/17 / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. ACIT(HQ) / DRP-2, BANGALORE, 4. DCIT / TPO-2(1), CHENNAI 5. PRINCIPAL CIT-2, CHENNAI 6. CIT (TP), CHENNAI. 7. 79 -2 /DR 8. ( : /GF.